Confidentiality and Trade Secrets

Trade Secrets and confidential information are often key assets in any business. Their value can’t be understated. The loss of confidential information can be catastrophic and very damaging, especially in the longer term. The question is what YOU can do to protect that information. First of all, let’s look at a few basics.

What is Confidential Information?

What is confidential information will vary from business to business. Examples of confidential information include trade and business information such as customer lists, business proposals and plans, minor innovations to a product or process, know how, internal policies and confidential data. This kind of information can be accessed by employees during the course of their employment, but it is very important that confidential information and trade secrets don’t disappear off when your employee does.

Protection of Your Confidential Information

Confidential information is an important and valuable asset. Leakage of confidential information into the public domain or to competitors can be disastrous. Theft of trade confidential information could give competitors an unfair advantage and stifle the investment you’ve made in innovation. In effect, if your competitors get their hands on your hard work, they can spring board themselves ahead by leveraging your investment. Don’t let this happen!

You need to make sure this material is protected at all times. This is done by putting in place preventative measures such as internal policies providing proper procedures to identify, protect and maintain confidential information. All confidential information should be stamped “Confidential” or have the word “Confidential” typed at the top of the first page. If the documents are kept electronically, they should be in a folder stating “Confidential Not to be Disclosed Outside the Company” and preferably be password protected. You can also set up specific confidentiality clubs, with limited members. Only those members of the club receive the information.

There are a range of things you can do to ensure your confidential information is not disclosed to third parties (such as competitors) by employees, contractors or customers unless such disclosure is under obligations of confidentiality. For example, written agreements containing obligations of confidentiality such as confidentiality agreements, non-disclosure agreements, employment contracts and contractor agreements must be put in place before any information is accessed by anyone.

We can help protect your valuable confidential information, know-how and trade secrets by helping you to identify such information and put appropriate preventative measures in place. This would include designing internal policies and appropriate confidentiality agreements.

One of our strengths is to assist you when confidential information has been leaked. This could happen when a former director or employee leaves with things such as manufacturing drawings and information, a key supplier or customer database, or financial information. In these cases it is vital to get the right advice and act quickly. We will work with you during this stressful period and ensure that any damage is minimised.

What is a Trade Secret?

The word ’secret” still has the capacity to pique interest, maybe it is a left over from childhood but it is true that if something is a “secret” it should be highly protected . A trade secret is an important asset because as long as you keep it a secret you have an advantage over your competitors. If the Coca Cola formula stopped being a secret, either because it was easily accessible or because it was reverse engineered, then Coca Cola’s profits would take a hit.

Do you have a trade secret in your business that you need to protect? It is worth thinking about this and mentally running though everything your business does and seeing what parts, if any, hinge on keeping a formula, practice, design, process, instrument or commercial method secret. If after thinking each stage of your business through you discover that something in your business needs to be kept secret then you need to think about how you are going to keep it secret and protect it. You need to do this asap before you grow your business, employ more/other people or do any form of licensing deal or franchise agreement or disclose the secret to anyone (even your family).

Protecting Your Trade Secrets

A trade secret is different to confidential information. Confidential information would cover contracts, employees details and pay structure et and whilst “confidential” is generally widely accessible within the company. Clearly you need systems that protect confidential information but you need a different system to protect your trade secrets. A system to protect your trade secrets should firstly consider assigning the trade secret out of the company and to a named individual/or specifically formed company to protect the secret in the event of the liquidation of the company, it should literally be kept under lock and key with designated named key holders who have all signed specifically drafted confidentiality agreements prior to being allowed to access and read the trade secret. Given cyber hacking,  data leaking and ease of digital copying  it is probably best not to keep the secret in digital format, instead it should be kept on paper with no copies taken. If it has to be disclosed to another party for reasons of a licensing deal etc then the conveyance of the actual secret should not be in the body of the agreement but in a separate paper document and given directly to the named individual who then signs for the receipt of the secret and who has previously signed the applicable confidentiality agreement.

Advantages of a trade secret over a patent/copyright

  1. A patent is limited to 20 years,
  2. A patent costs money to register and defend.
  3. You have to disclose what your invention is to get a patent
  4. Copyright is limited to a period of time

Whereas a trade secret, provided kept secret,  lasts forever and costs nothing to register. The obvious downside of a trade secret is that there is very little you can do once that secret has been leaked.

If you would like some more information on this intellectual property topic please don’t hesitate to contact a member of our  team.